ROI Calculator

Return on investment, plainly

ROI expresses gain as a percentage of what you put in:

ROI = (final value − amount invested) ÷ amount invested × 100

It's simple and universal, which is its strength — you can apply it to shares, a property, a marketing campaign or a piece of equipment. It's also incomplete, because it says nothing about how long the money was tied up.

Annualised return makes comparisons fair

A 60% total return is excellent over two years and unremarkable over fifteen. Annualising strips out the time difference:

annualised = (final ÷ initial)^(1 ÷ years) − 1

Whenever you compare two investments held for different lengths of time, compare the annualised figures. Total return alone flatters whatever was held longest.

What ROI leaves out

• Risk. A 12% return from government bonds and a 12% return from a single small-cap stock are not the same achievement.
• Costs. Transaction fees, management charges, tax and maintenance all come out of the real result.
• Timing of cash flows. If you added money partway through, simple ROI overstates performance. Money-weighted return handles that properly.
• Opportunity cost. The relevant question is always "compared to what?"

A reasonable benchmark

For investments, a broad global index fund is the honest comparison — it's what you could have had for almost no effort. Beating a savings account is a low bar; beating the index after costs is the one that counts.